Is forex day trading legit? And if so how profitable is it?
Friday, January 31, 2014
, Posted by Ryanita at 1:59 PM
anberain
Answer
The currency trading (FOREX) market is the biggest and the fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than the NASDAQ daily turnover.Markets are places to trade goods. The same goes with FOREX. The Forex goods (or merchandise) are the currencies of various countries. You buy Euro, paying with USdollars, or you sell Japanese Yens for Canadian dollars. That's all.
How does one profit in Forex?
Very simple and obvious: buy cheap and sell for more! The profit is generated from the fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, Easy-Forex⢠offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.
This paragraph of the article just shows how profitable it is. VERY profitable. But this ain't the way to 'get rich overnight.' It requires A LOT of hard work in figuring out your own strategies and how to deal with possible losses. Forex trading is legit. But a warning that there are a lot of forex scammers out there. Check out the links below, especially the articles in the forex resources section. Its very helpful.
The currency trading (FOREX) market is the biggest and the fastest growing market on earth. Its daily turnover is more than 2.5 trillion dollars, which is 100 times greater than the NASDAQ daily turnover.Markets are places to trade goods. The same goes with FOREX. The Forex goods (or merchandise) are the currencies of various countries. You buy Euro, paying with USdollars, or you sell Japanese Yens for Canadian dollars. That's all.
How does one profit in Forex?
Very simple and obvious: buy cheap and sell for more! The profit is generated from the fluctuations (changes) in the currency exchange market.
The nice thing about the FOREX market, is that regular daily fluctuations, say - around 1%, are multiplied by 100! (in general, Easy-Forex⢠offers trading ratios from 1:50 to 1:200). If, for example, the exchange rate of "your" pair of currencies increased by 0.6% in the last 4 hours, your profit will be 60% on your investment! Such can happen in one business day, or in a few hours, even minutes.
This paragraph of the article just shows how profitable it is. VERY profitable. But this ain't the way to 'get rich overnight.' It requires A LOT of hard work in figuring out your own strategies and how to deal with possible losses. Forex trading is legit. But a warning that there are a lot of forex scammers out there. Check out the links below, especially the articles in the forex resources section. Its very helpful.
What happen behind the support/ resistance theory in Forex trading ?
Mideel
I mean a lot of experts always mention about them, so surely they aren't bullshit.
But how actually that can happen ?
When the markets buy or sell at certain price in a great size, then if later on the price comeback there if it can pass those support/resistance then it can break and move farther while if it can't break it, it will retrace back....
So what is the reason behind this ?
Answer
support/resistance applies to stocks as well as Forex or other commodities.
It is quite established and quite reliable ...the way to think of these levels is to think about the battle between buyer/seller and supply/demand
Let us say I am selling tomatoes in a market. I decide that a good price for me is $1/lb and I sell a lot of them...buyers like the price and they sell....I am running out of tomatoes so I decide to sell the tomatoes at a higher price...say $1.50...I don't sell the same number but heck I am making 50% more per pound....so I raise the price again as there are far fewer tomatoes and I don't get a new shipment for a couple of days...I raise my price to $2.00/lb....Buyers think this price is too much...they don't buy them anymore $2.00/lb is a resistance level....
I have fewer and fewer buyers so ok...I made a mistake and lower my prices back to $1.50 and I get a few more buyers...but then my next shipment arrives and I have tons of tomatoes...If I don't sell them they will spoil...So I reduce my price back to $1/lb...the buyers increase but still not enough of them to take all my tomatoes....so I reduce my price to $0.75/lb...but the buyers want them for $0.50/lb...this is below my cost....I would lose money selling them that low....I dig in my heels and demand $0.75....that $0.75 becomes a support price.
As my supply of tomatoes reduces and the demand increases for them...I can raise my prices again to $2.00 where the Buyers say they are too expensive and stop buying....this rise and fall of price goes on for some weeks....I refuse to sell less than $0.75 and the buyers refuse to pay more than $2.00
But winter comes...my resupply of tomatoes is not as great as before...I raise my prices to $2.00/lb...the buyers baulk at that price but the supply of tomatoes everywhere is very low....I stick to my price at $2.00/lb...Perhaps I am the only source of tomatoes for miles around....Suddenly I realize that the buyer WILL pay more for those tomatoes...I raise my prices to $2.25 People buy because they need those tomatoes...I have broken that resistance at $2.00.....NOW I say that will be my bottom price for the next while until the spring when tomatoes are plentiful again.....that resistance of $2.00 has now changed into a support level....
I don't know where the resistance level of the buyer is now so I gradually increase my price until I find where the Buyers say no....that becomes the next resistance level.
The same thing happens to stock price, forex and commodities....when you study charts you will see support/resistance levels establish themselves...Often for no apparent reason these levels last many months...when the price breaks these levels up or down the movement can be pretty strong...especially if the price rises to a resistance or falls to a support only to rebound in a reverse direction to try again.
Think of it like a battering ram hitting a door....repeated hits weaken the door and when it breaks people rush through to the next door....the more difficult it is to pass these levels the harder it is to reverse backward once passed.
I hope these analogies help sometimes it makes it easier to think of stock/forex/commodity prices as a battle between buyer/seller.
support/resistance applies to stocks as well as Forex or other commodities.
It is quite established and quite reliable ...the way to think of these levels is to think about the battle between buyer/seller and supply/demand
Let us say I am selling tomatoes in a market. I decide that a good price for me is $1/lb and I sell a lot of them...buyers like the price and they sell....I am running out of tomatoes so I decide to sell the tomatoes at a higher price...say $1.50...I don't sell the same number but heck I am making 50% more per pound....so I raise the price again as there are far fewer tomatoes and I don't get a new shipment for a couple of days...I raise my price to $2.00/lb....Buyers think this price is too much...they don't buy them anymore $2.00/lb is a resistance level....
I have fewer and fewer buyers so ok...I made a mistake and lower my prices back to $1.50 and I get a few more buyers...but then my next shipment arrives and I have tons of tomatoes...If I don't sell them they will spoil...So I reduce my price back to $1/lb...the buyers increase but still not enough of them to take all my tomatoes....so I reduce my price to $0.75/lb...but the buyers want them for $0.50/lb...this is below my cost....I would lose money selling them that low....I dig in my heels and demand $0.75....that $0.75 becomes a support price.
As my supply of tomatoes reduces and the demand increases for them...I can raise my prices again to $2.00 where the Buyers say they are too expensive and stop buying....this rise and fall of price goes on for some weeks....I refuse to sell less than $0.75 and the buyers refuse to pay more than $2.00
But winter comes...my resupply of tomatoes is not as great as before...I raise my prices to $2.00/lb...the buyers baulk at that price but the supply of tomatoes everywhere is very low....I stick to my price at $2.00/lb...Perhaps I am the only source of tomatoes for miles around....Suddenly I realize that the buyer WILL pay more for those tomatoes...I raise my prices to $2.25 People buy because they need those tomatoes...I have broken that resistance at $2.00.....NOW I say that will be my bottom price for the next while until the spring when tomatoes are plentiful again.....that resistance of $2.00 has now changed into a support level....
I don't know where the resistance level of the buyer is now so I gradually increase my price until I find where the Buyers say no....that becomes the next resistance level.
The same thing happens to stock price, forex and commodities....when you study charts you will see support/resistance levels establish themselves...Often for no apparent reason these levels last many months...when the price breaks these levels up or down the movement can be pretty strong...especially if the price rises to a resistance or falls to a support only to rebound in a reverse direction to try again.
Think of it like a battering ram hitting a door....repeated hits weaken the door and when it breaks people rush through to the next door....the more difficult it is to pass these levels the harder it is to reverse backward once passed.
I hope these analogies help sometimes it makes it easier to think of stock/forex/commodity prices as a battle between buyer/seller.
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